MetLife Inc. is close to
striking a deal for Citigroup Inc.'s Travelers Life
& Annuity Co., say people close to the matter, in a deal that could be
valued at around $12 billion.

An announcement is expected
within a matter of days, these people add, though the negotiations could still
come apart. A torrent of large transactions have flooded the stock market in
the past week, as corporations have again regained comfort signing the kind of
big-scale merger deals that had disappeared from the business landscape over
the past three years.

Consolidation within the
life-insurance industry has been widely predicted; less certain is how quickly,
and how soon, that consolidation would play out. The rationale for such moves:
Insurance companies can drive better profit margins by serving larger numbers
of customers over essentially the same back-office systems and incrementally
larger sales forces.

In anticipating this
consolidation, Citigroup reasoned that it would be
more prudent to sell its unit at an attractive price rather than take on the
responsibility of consolidating itself, say people familiar with the matter.

As many as three other parties
were interested in the unit, which is based in Hartford, Conn., according to a person familiar with the matter. A
spokeswoman for Citigroup didn't return requests for
comment last evening, nor did spokespeople for MetLife. MetLife's ambition for
Travelers Life & Annuity, however, also signals another shift away from the
concept of one-stop financial supermarkets -- a concept pioneered by Citigroup in the 1990s.

Citicorp.'s merger with
Travelers, consummated in October 1998, was widely seen as the future of the
insurance business. Among many in the industry, it became conventional wisdom
that insurance would increasingly merge with banking or other financial
companies.

But the trend never seemed to
take off and in August 2002, Citigroup began to
unwind the deal by spinning off its property-casualty insurance operations,
Travelers Property Casualty. Last year, that company merged with St. Paul Cos.,
St. Paul, Minn., to become St. Paul TravelersCos., one of the largest commercial insurers in the country.
Citigroup Chief Executive Charles O. Prince has
repeatedly told analysts in recent months that the world's largest
financial-services firm intends to examine the sale of certain noncore businesses. In November, Citi
sold off a truck-leasing unit to General Electric Co. for $4.4 billion. Five
months earlier, Citi agreed to sell its European
vendor-finance leasing operations to CIT Group Inc. Overall, Citigroup's life and annuities operations contributed $751
million in net income in 2003 on premiums of $3.7 billion. The unit sells
life-insurance and annuity contracts to small businesses and individuals, as
well as corporate-owned life insurance and group annuities used in retirement
plans.

Meanwhile, life insurers are
generally smaller and less efficient than their noninsurance
competitors, including banks and mutual-fund managers, said Michael Barry,
managing director for insurance at Fitch Ratings. Many have a deeply entrenched
distribution system dependent on far-flung networks of agents, which is
typically costlier than the direct-to-consumer models that other
financial-services companies use.

"Even though there have been
some improvements, they're still inefficient from an expense perspective,"
said Mr. Barry, who wasn't discussing any specific deal or companies.

By growing larger, companies hope
to squeeze out more economies of scale and improve their margins. With a $30
billion market capitalization, MetLife has its hand in a range of products,
from its core business selling individual and group life-insurance products and
annuities to substantial asset-management and auto insurance. New York-based
MetLife -- also known for its advertisements starring Snoopy and other Peanuts
cartoon characters -- reported net income of $2.2 billion on revenue of $35
billion in 2003, the last full year available.

For much of its 135 years,
MetLife was a mutual insurer, owned by its policyholders; in April 2000, the
company transformed itself into a publicly held stock company. As of 4 p.m.
Friday in New York Stock Exchange composite trading, MetLife shares were down
71 cents at $39.94, near their 52-week high; Citigroup
shares were down 18 cents at $48.38, in the middle of their 52-week trading
range.

Two deals announced in fall 2003
prompted some to predict a rapid uptick in
life-insurance mergers. Manulife Financial
Corp. completed its deal to buy John Hancock Financial Services for $12.88
billion in April last year. In May, after a fierce proxy battle, MONY Group
Inc. shareholders approved the company's sale to AXA SA of France. Also last spring, Safeco Corp. announced the
sale of its life and investments unit to investors led by White Mountains Group
Ltd. for $1.35 billion.

Still, several analysts had
recently expressed skepticism that life-insurance consolidation will pick up
any time soon. In a Jan. 23 report to investors, Morgan Stanley insurance
analyst Nigel Dally said there are too few likely sellers to maintain much of a
short-term trend, "even though longer run, consolidation appears
inevitable."